Bethlehem Township drops lawsuit over arena funding

Suburban township that filed first salvo in the battle over special tax zone stands down.

Preparation for a new hockey arena in downtown Allentown continued last… (DONNA FISHER / THE MORNING…)

July 17, 2012|By Scott Kraus

With its residents' earned income taxes removed from the mix by state lawmakers, Bethlehem Township has dropped its lawsuit against Allentown's Neighborhood Improvement Zone.

The township commissioners' unanimous vote Monday night came without discussion. But after the meeting, commissioners Chairman Paul Weiss said that while he's pleased the legal fight is over, it probably never would have happened if the original legislation were more open.

"The way they went about it was so totally un-transparent. If it was addressed to everyone, maybe it would have worked,'' he said.

Township solicitor James Broughal said the last item to bring the suit to a true conclusion is when all of the earned income tax money taken so far is returned.

He said it's unclear where the money is, but believes it's being held by the private tax collection agency Berkheimer Associates.

It's not yet known how much money should be returned to the township, but Weiss said it should be more than what the lawsuit cost.

"Our bill at the end of the day should be less than $10,000,'' he said.

Bethlehem Township had joined Hanover Township, Northampton County, in March to become the first municipalities to file suit over the special tax district that siphoned their earned income tax dollars to finance a hockey arena complex in downtown Allentown.

Eventually 17 municipalities, one school district and the Pennsylvania State Association of Township Supervisors joined in two municipal lawsuits against the Neighborhood Improvement Zone.

So far, at least Whitehall and Lower Nazareth townships have voted to drop out. The earliest Hanover can vote is next Tuesday.

The legal fight has stalled construction of a $158 million downtown arena that city officials are eager to get back on track.

The lawsuits have prevented the Allentown Neighborhood Improvement Zone Development Authority from issuing $220 million worth of bonds to finance construction of the arena, attached hotel and medical offices, which supporters hope to complete by fall 2013.

Within the zone, all state and local taxes, not including property taxes, were to be set aside to cover arena construction costs.

But the municipalities argued the city should not be able to tap earned income taxes paid by residents of other municipalities working within the boundaries of the 130-acre zone to finance construction of the arena and other downtown redevelopment projects.

They also charged that the state law that created the NIZ was unconstitutional because Allentown was the only municipality that could ever create such a zone, making it prohibited "special legislation."

State lawmakers — led by NIZ author Sen. Pat Browne, R-Lehigh — amended the law in June to remove suburban earned income taxes from the mix and open the program to third-class cities with populations of more than 106,000, a group that could theoretically include other cities someday.

Attorneys representing several of the municipalities involved in the two lawsuits, including Bethlehem Township, have said the changes would likely be sufficient to get them to drop their lawsuits.

Last week, Commonwealth Court suspended all lawsuits against the zone, giving municipal officials until September to evaluate the changes made to the NIZ law and either drop their suits or explain why they should continue.

Upper Saucon Township and Catasauqua filed their own lawsuit in May, raising similar objections and asking the court to turn the matter into a class action.